The rules about Power of Attorney Gifts to family

We receive a lot of enquiries from relatives who have been appointed to act as an Attorney under a Lasting Power of Attorney for a loved one, including questions on Power of Attorney Gifts.

The position of Attorney is one of trust since the Lasting Power of Attorney empowers them to step into the shoes of the incapacitated person (the Donor) and act on their behalf. The law requires the Attorney to act in that person’s best interests at all times, and to ensure that they do not personally profit from their actions.

What are the rules on Power of Attorney Gifts?

The most regular enquiry we get relates to an Attorney’s power to make gifts on behalf of the Donor. There is a lot of confusion about Power of Attorney Gifts and how much the Attorney can give away. In addition, we are often asked if Attorneys can undertake Inheritance Tax mitigation for the incapacitated person by making significant gifts to reduce the value of their estate.

The rules set out in the Mental Capacity Act 2005 only permit proportionate and reasonable gifts on ‘customary occasions’ (such as birthday, wedding, anniversary or Christmas gifts) to persons who are related to (including the Attorney) or connected to the incapacitated person. Attorneys can also make gifts to charity if the incapacitated person has done this in the past.

A practical example

Recently, a Court authorised a gift of £7 million to the son of a 72 year old woman who suffers from dementia. This was both surprising and a little concerning because, in my view, publicity about this case will only add to the confusion about the rules about gifts. If you do read the case though, it becomes clear that this was an unusual set of circumstances.

The Court took the view that after the gift of £7 million, the mother would still be left with £10 million in her estate, which should be more than enough for her future needs.

The Court did comment that whilst the mother would see no direct benefit from saving tax on her estate when she dies, it was persuaded by the evidence submitted that it would have been the mother’s wish to enhance the amount that her beneficiaries would receive.

What is the process of making Power of Attorney Gifts?

As an Attorney, if the gift you wish to make for the Donor does not fall within the rules, you will need to make an application to the Court for authority to proceed.

The process can be time-consuming and expensive, it is a question of assessing whether it is worthwhile incurring the costs of a Court application and, in particular, gauging your chances of success.

Talk to an expert if you’re unsure

Astle Paterson’s Private Client Team has experienced lawyers who can advise Attorneys about their duties and powers under a Lasting Power of Attorney.

If you would like advice from the experts:

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